Emily Pakhtigian, assistant professor of public policy and the Jeffrey L. and Sharon D. Hyde-McCourtney Career Development Professor, explains what the Regional Greenhouse Gas Initiative is and how its adoption by Pennsylvania may impact the environment, economics, and wellbeing of PA communities.
RGGI, or the Regional Greenhouse Gas Initiative, is a regional consortium of New England and mid-Atlantic states that is really a cap-and-investment program that is designed to reduce carbon emissions from coal-fired power plants. Basically, the way this program works is that coal-fired power plants, these large industrial polluters, can buy allowances for their carbon emissions. Basically, they need to have allowances to actually emit carbon. And if they don't have enough allowances, they either need to buy more or they need to figure out a way to produce their electricity without buying more allowances. And these allowances operate through auctions that allow for some level of kind of trading among these industrial players.
RGGI has been really effective in the states, the kind of 10 or 11 states in which it currently operates. In RGGI's first decade, it reduced carbon emissions from coal-fired power plants in those states by 48%, by focusing really on emissions reductions from kind of the largest industrial and coal-fired power plant players.
There are some political and legal potential challenges for Pennsylvania's joining of RGGI. It was implemented through executive order by Governor Wolf. There are some in the legislature that are not as supportive of Pennsylvania joining RGGI. It's still a bit of an open question as to whether Pennsylvania will join, but we are currently scheduled to join in 2022, which would be kind of a big shock to energy policy here in Pennsylvania.
These cap-and-trade programs are designed to generate revenue, right? Through the auctions of these carbon emission allowances, the state generates revenue that can then be used to do things like reduce potential increases to electricity costs or invest in areas that might be seeing economic declines as a result of changing energy trajectories. There's a redistributive piece of thinking about the economics of these cap-and-trade systems that is also important from a policy perspective.
From an environmental perspective, it's shown to be fairly effective in other states. I do think on along those lines in terms of reducing carbon emissions, I think it could be highly effective.
I think the important thing for Pennsylvania to think through is the appropriate use of those allowances, right? So much of the political pushback surrounding Pennsylvania joining RGGI would be related to these economic concerns, right? Would joining RGGI raise energy prices for consumers? Would it impact the economic well-being of areas that have based their local economies on coal or on coal-fired power plant productions, electricity productions?
I think really for Pennsylvania, what it's important to think through is how can the revenues raised via those auctions help to assuage concerns about potential rising energy prices or deal with needs for job creation or to improve economic well-being in some areas that might see at least short-term declines as a result of changing energy priorities here in the state.
What states have adopted RGGI?
- New Hampshire
- New Jersey
- New York
- Rhode Island